Our academic textbooks preach that index funds outperform actively managed funds 70% of the time. What about the remaining 30% of actively managed funds that outperform index funds? There is no reliable method to know who will be in that 30% ahead of time.

Will market efficiency decline as money moves out of actively managed funds into index funds? I pose this question since actively managed funds are “active” in conducting research on companies, their competitors, their suppliers, and the global economy. Active fund managers subsequently trade on that information and that impacts the market price. So, if all the money goes into passive funds, who is left to do the research?